Payroll is the compensation or the total wages an employer must pay to its employees. Companies manage payroll to remain legally compliant. Businesses can decide to pay on a weekly or monthly basis, most companies in India opt for monthly pays. All processes beginning from collecting employee data to recording expenses are managed under payroll management. It is one of the most crucial components of the Human Resource (HR) department.
Employers' main focus is always on the growth and expansion of their company. They don’t want to be burdened with payroll-related issues or delays. Even though payroll is a non-core responsibility, it is a mandatory process and needs to be executed meticulously. Many organizations still manage payroll manually; however that can lead to errors and damage the reputation of your company.
Payroll outsourcing is handled by a team of experts who understand your company's needs and access the best software and technologies. They ensure a smooth transition phase and handle all your payroll-related administration flawlessly. Open and transparent communication between an employee from your firm and the outsourcing company will surely lead to success. Many organizations ranging from startups to multinational companies have realized the importance of outsourcing payroll and have successfully switched their payroll management. The pandemic has further highlighted the importance and benefits of outsourcing payroll. Before we dive deeper into the benefits, let's understand what outsourcing payroll encompasses.
What is payroll outsourcing?
Payroll outsourcing is hiring a third-party payroll service to manage payroll administration. The outsourcing industry offers two major benefits, which are: Save time and money. Small companies to huge multinational companies (MNCs) rely on well-established outsourcing firms.
Let’s understand which factors have popularised payroll outsourcing all over the world
1. Get Access to Advanced Technology
Payroll outsourcing company's core responsibilities include manage payroll; they have a team of professionals working towards payroll processing and have the best technology to do so. They handle the work for many companies and are heavily invested in the same.
Payroll software helps streamline processes and ensures that employees are paid timely. This software helps calculate pay, taxes, deductions and help companies remain statutory compliant with state and federal laws.
Once you decide to pair up with a payroll outsourcing firm, you need not invest in costly software. You will directly get access to advanced technology because of your payroll partner.
2. Easy Access for all employees
Queries related to payroll must be catered to immediately. Employees should be empowered to check and manage their accounts. Payroll engines help process payroll automatically and disburse salaries at a click on a button. Every employee can access payroll portals individually, allowing them to view their payslips, submit investment plans, and create reimbursement claims. This saves a lot of time and effort for both parties.
Payroll queries can be a source of confusion amongst employees, and they should be managed well by you as an organization.
3. Don't waste time by hiring experts
Employers are not experts at being aware of changing government regulations, laws related to taxes, labour laws, changing withholding rates, etc. They need professionals who have good knowledge about all things related to payroll. Outsourcing firms can give them access to the best experts who understand their company and constantly evolving government laws and regulations.
There is no need to waste time, money, and efforts hiring experts to help you stay compliant. Many start-ups, medium-sized companies, and big firms have started valuing outsourcing business operations.
4. Handover all the legal payroll details for your peace
Data from the Internal Revenue Service (IRS) suggests that approximately 33 percent of employers make payroll errors. A report by the IRS states that most small business owners lose $845 every year on penalties. Employers are no experts in the legal world of government regulations.
Given all these complicated tasks, processing them on your own can be very expensive in the long run. Handing over legal payroll-related processes to your outsourcing company can relieve you from these stressful tasks.
Outsourcing companies deal with many companies and have a good amount of experience handling legal compliance and mitigating payroll errors. This can save you from unpredicted payroll errors and penalties.
How does the payroll provider keep employees' data safe?
When it comes to payroll, confidentiality is a high priority. Many companies hesitate to outsource payroll due to a fear of data breaches. Personal information such as bank details, address, social security number, and salaries are prerequisites to process payroll. Companies need to uphold technology protocols, security measures, and regular training of payroll managers. Data protection is a human right, and violations can lead to penalties.
A trusted third-party payroll service provider can make this process very smooth for you. Outsourcing to a stable and experienced firm can be a shelter for your payroll data. A quality payroll provider utilizes multiple backups and server locations to mitigate data breaches. Outsourcing companies use various technologies that can alert in case of fraudulent activities.
How do you avoid delays by payroll service?
No employee appreciates late payments. Even one instance of late payment can cause an unmotivated and disengaged workplace environment. It makes your employees doubt your financial stability and mistrust in manage payroll.
Payroll delays can also lead to legal issues as a consequence of non-compliance. Let’s look at several ways we can avoid delays in payroll services
1. Map critical dates on your calendar
Payroll-related tasks can take away a quarter of an HR manager's time every day. Payroll management requires careful coordination amongst various departments and managing time well to meet critical deadlines.
Hence, utilizing an internal calendar is very essential to keep track of time and the amount of work that needs to be accomplished. Teaming up with an outsourcing firm, ensuring all departments are connected well will help avoid delays in payroll.
2.Simply payroll policies
It is important to simplify and streamline policies regarding attendance, leaves, time off, commissions, overtime, reimbursements, which will help lift the administrative burden. These policies must be communicated well to your staff members, and confusion should be clarified timely. Defining crucial elements and transparency will surely make payroll processing much smoother.
3. Switch to paperless payroll
Today everything is made available digitally. The pandemic has pushed all business operations online and made them available to all its stakeholders. Many organizations have switched to paperless payroll, further streamlining the payroll process.
Digital payroll systems give the flexibility of having all payroll operations in one place. This makes automation easier and faster, saving time and money. A study revealed that most employees are comfortable accessing their payslips electronically.
4. Classify employees carefully
An organization can have different types of employees, permanent employees or part-time independent contractors. With the pandemic coming into the picture and people working from home, this concept has been altered.
HR managers are confused about whether to consider people working from home as independent contractors or not. For permanent employees, the tax deduction is done as an organization, and for independent contractors, the responsibility of paying tax lies with the person itself.
Therefore, it is imperative to classify employees in alliance with Fair Labor Standards Act (FLSA) regulations. Misclassification can lead to delay in payments which can eventually lead to penalties or fines.
Even though payroll is an integral part of every organization, it is non-core. It will add to your employee's task list, but it is never directly involved in generating revenue for your company. Hence, an outsourcing company relieves your employees from the complex processing and enables them to work on core company responsibilities. It may seem daunting to hand over your payroll responsibilities to a third-party service provider. However, many payroll firms can help you cater to your organization’s individual needs.
Moreover, outsourcing is popular because they considerably reduce the cost, effort, and time required to process payroll. They use top-notch technologies to automate the process and make it error-free.
By outsourcing to a third-party payroll service provider, you can certify that all operations, from basic payroll calculations to tax compliance, are managed efficiently by the provider. Hiring a suitable third-party payroll provider can surely benefit your company and your employees to remain happy and engaged in their work.
Struggling to find a trustworthy third-party payroll service provider?
Your reach is finally over! Paysquare is one of India's best leading payroll outsourcing companies, with two decades of expertise in payroll management. They cater to payroll calculations, tax compliance, connecting with employees while maintaining absolute transparency and confidentiality.
They use an award-winning automated payroll system that flawlessly performs all types of payment. They abide by the deadlines and manage payroll with high accuracy. They have a powerful payroll engine known as ‘Precision’, making outsourcing payroll a piece of cake. If you are looking for simpler solutions for managing payroll, outsourcing is the most suitable option. To understand all the payroll services offered, book an appointment with Paysquare today!